Section 11AC penalty requires proven intent to evade duty, not mere valuation dispute over physician's samples.

Penalty under Section 11AC of the Central Excise Act, 1944 requires proof of mens rea, including suppression of facts, deliberate misdeclaration, or intent to evade duty. On the facts noted, physician's samples were cleared on a cost-data basis in line with then-prevailing departmental instructions, and the later valuation circular was not shown to have been deliberately ignored. As no fraud, suppression, or deliberate misstatement was established, the statutory conditions for penalty were not met and penalty equivalent to duty was held not imposable.

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Issues: Whether penalty equivalent to the duty amount was imposable under Section 11AC of the Central Excise Act, 1944 in the absence of mala fide intention, suppression, or deliberate misdeclaration.

Analysis: The assessee had cleared physician's samples by paying duty on the assessable value adopted on a cost-data basis in line with the then prevailing departmental instructions. The change in valuation practice introduced by the later circular had not, on the facts found, been shown to have been deliberately ignored with intent to evade duty. The record did not disclose any fraudulent conduct, suppression of facts, or deliberate misstatement. In the absence of these essential ingredients, the statutory condition for invoking penalty under Section 11AC was not satisfied.

Conclusion: The penalty was not imposable and the assessee succeeded on this issue.

Ratio Decidendi: Penalty under Section 11AC cannot be imposed unless the department establishes mens rea manifested by suppression, misdeclaration, or intent to evade duty.

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